Lockout Blues

July 1 brought the inevitable and dreaded NBA lockout that we all feared but knew was coming. Suddenly, two of the “big 3” look more like Washington DC than world class sports leagues. And much like DC, progress won’t be made without major concessions on both sides. Nothing should be “off the table”. It’s a major game of chicken, and no one wants to blink, but without compromise we are indeed headed towards armageddon.

In the case of the NBA, my biggest fear is that both sides rely too much on the last lockout to gauge the potential fallout of this version. The last lockout was over 10 years ago. Times have changed dramatically since then, and anyone who takes fan loyalty for granted in the 21st century is a fool. Fans today have a plethora of options when it comes to leisure time and discretionary spending. When my father was a kid, he spent his summer days listening to baseball games on the radio from his front porch. It was indeed “the national pastime”. When I was a kid, I watched the NFL and the NBA on TV. My 21st century son barely watches sports, and when he does he is simultaneously playing video games on his handheld device. And adults today have thousands of channels on TV, the internet and countless other activities to fill their time. If the NBA loses a season due to a lockout, no one should assume that the fans won’t find other things to do with their time. Fan loyalty, the golden goose of sports, is more fragile than many people believe.

In the case of the NBA, the gap between the union and the league feels enormous to me. We can debate the numbers, but it’s apparent that the league has endured some amount of loss during the recent recession years. On the heels of one of the best seasons in years (in terms of attendance and ratings), I imagine the league wishes the CBA had expired sooner. Regardless, we’re in the midst of a standoff. Here are the key issues that I think need to get addressed:

1. Revenue Sharing. The bulk of the losses are generated by small market and poorly run teams. There’s no way the Lakers and the Timberwolves are on the same page on this issue. If covering losses is the key issue, then profitable teams from mega-markets are going to have to subsidize smaller market teams. No way Sacramento can ever compete with New York. Teams rely on ticket sales, local broadcast and sponsorships to generate revenue. Expecting SAC to compete with NYC is like asking me to enter the dunk contest.

2. Contraction. This ties to issue #1. Every bricks and mortar business under the sun closes locations that aren’t profitable. Leagues are loathe to do that, but it may be unavoidable if the losses reported are even remotely accurate. Either through contraction or relocation, a few of the teams deepest in the red need to go.

3. Parity. I’ve said before that parity is a mirage. Small markets are not on an even playing field with big markets. Hard salary caps won’t help much, as they’ll simply guarantee deeper profits for big market teams. Small market teams can only compete when they are managed and marketed effectively (see San Antonio and OKC). Yes, some small market teams made the playoffs, but the big market teams made the finals, and almost always win the title.

4. Cake. I believe the NBA is in a situation where they want to “have their cake and eat it too”. The league is going to need to make a choice between limiting salaries and limiting free agency. If the Denver Nuggets can’t offer Carmelo Anthony much more than other teams, he is likely to bolt to a place where he has roots and feels he can improve his quality of life. If small market teams aren’t allowed to pay their top guys fair market value, they’ll all head to bigger markets, warmer weather, etc and the NBA will look a lot more like baseball. Say goodbye to parity.

4. Guaranteed contracts. The sacred cow on our side of the fence. The challenge with the current system is that teams locked into long term contracts with injured players (TMac, Michael Redd, etc) are basically eliminated from championship contention on opening night. The league wants non-guaranteed contracts, but my view is that bigger salary cap exceptions for injured guys is the better solution. Insurance policies provide some relief as well. The rest of the world allows for guaranteed contracts, so pro leagues should too. There’s probably a reasonable compromise available here, but eliminating guarantees isn’t one of them.

Bottom line is that neither side wants to appear weak, and without compromise on both sides we are doomed. A lost season will likely result in diminished fan loyalty that might never be recovered. Fans have many choices these days. Let’s not take them for granted.

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About Bill Sanders

SVP of Personal Brand Management at PMK*BNC. Helping icons from all walks of life to connect with their fans and monetize their brands.
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